228: The Recipe | Liang Wu and Dan Herrera | Evolving Internet Insights | AI, Web3 and Emerging Tech

[00:00:10] Pete Townsend: Hey there, I'm Pete Townsend, and this is Money Never Sleeps. We look inside the minds of entrepreneurs and at the crossover of startups, enterprise, finance, technology, and life as we know it. On the show this week, we've got Liang Wu and Dan Herrera.

[00:00:21] Liang Wu: I am Liang. I am a co-founder at Eleven26 Capital and also a senior researcher at the Harvard Business School.

[00:00:28] Dan Herrera: Hey, I'm Dan Herrera, and I'm a co-founder at Eleven26 Capital.

[00:00:34] Pete Townsend: Both from Eleven26 Capital. An early-stage VC firm investing in diverse founders on the evolving internet across Web2 and Web3.

This is Liang's second time on the show, and you can hear his full story on episode 209 of this podcast. In addition to his role as the co-founding managing partner at Eleven26 Capital, Liang is also a senior researcher at Harvard Business School where he researches Web3 and AI and writes Web3 and AI cases for the MBA curriculum.

He also supports and leads growth and community at Harvard's CryptoLab. Liang writes regularly on his evolving Internet Insights newsletter, where he and Dan Herrera curate the most interesting emerging tech stories and add their analysis insights and so what's on top. Liang's professional background is a mix of startups, venture capital, and management consulting.

As for Dan Herrera, he's also a co-founding managing partner at Eleven26 Capital. Dan also advises a portfolio of venture capital firms and family offices. Spearheading everything from portfolio construction and strategy setting to deploying capital for and operationalizing these firms. Dan writes regularly with Liang on the evolving internet insights newsletter and his professional background.

It's also a mix of venture capital startups and management consulting. In this episode, we get into how Liang and Dan originally got together and stayed close through the years. We take a look at their evolving internet thesis across Web 2 and Web 3. Also, building a platform for investing through content creation and community into a flywheel.

And a forward-looking view on the intersection of Web 3 and AI. All right here on Money Never Sleeps.

You guys okay today? You're in New York City. You both in New York City?

[00:02:19] Dan Herrera: Both here. Different boroughs.

[00:02:21] Liang Wu: You can tell the shading of the lighting here that it's a cloudy day.

[00:02:25] Pete Townsend: Okay, I was going to say, what, Liang you're on the sunny side of the street?

[00:02:28] Liang Wu: No, I just have my windows open.

[00:02:32] Pete Townsend: Awesome.

I've darkened things here in my recording studio come office. And I've got the shades down. And I've been I've been hobbling around in crutches the last actually the last few hours. I had minor foot surgery on Thursday and was supposed to be just, was supposed to just be cleaning up something from a few years ago when I had my foot reconstructed, and the doc found something he didn't like.

So I woke up with this big boot on and he came into the recovery room like four hours later. He's like, I bet you didn't. Expect to see that on your foot, did you? I'm like, no. So I'm on crutches for two weeks. I didn't know I was supposed to be on crutches. I thought this was a walking cast just until about a few hours ago.

When I emailed the doctor, I said, just in case, should I be walking? He's like, no, , absolutely not. I'm like, all right. He's like, the wound needs to heal. So, I'm sitting a bit awkwardly today. I'm not going to lift up. My foot and show you the walking boot for the benefit of the audience, because this is audio only.

 But hopefully this is the last of the nastiness of my right foot. And I said to someone the other day who I didn't get a reply from yet, who said, Pete, you just need to buy yourself a new right foot. And I said well, actually, I've already invested in a cloning specialist through tech stars who have given my DNA to when they're growing me a new one.

It'll be ready by Christmas. And he didn't respond. So anyway, listen, guys, enough about me awesome to have you on the show. Liang. You've been with us before. Dan you haven't been with us before, but thank you both for coming to our investor dinner that we did for tech service web three back in June.

It was awesome to have you guys with us at the Smith. We still got to get the t shirts done, getting to the Smith, just like getting to the Greek with all the trials and tribulations we went through to get there for dinner that night. But it was great to have you guys with us. So thanks again for coming.

[00:04:15] Liang Wu: Yeah. Thank you.

[00:04:16] Pete Townsend: Absolutely. Thanks Pete. Awesome. Like we said, Liang, this is your second time on the show. I loved our first chat back in March and that was episode 209. We can stick that into the show notes so that everybody can get the full expose on Liang. And it was one of those chats that could have gone on for hours.

And get into a Tim Ferriss length podcast episode. And, but for people who didn't get to listen to that the first time around, let's make it easier on our listeners. How about you just get us caught up on how you got to this point and what you're doing right now.

Say, just give us a quick rundown. Yeah.

[00:04:47] Liang Wu: Yeah, totally. My background I started off my career as a management consultant really working on strategy operations and growth. Did after consulting, went to business school at Harvard. From there really fall into, the crazy world of emerging tech and cryptocurrencies and Web3.

So post business school was the first business hire at an early stage Web3 project building on top of Ethereum. And then from there did a bunch of strategy and growth operations, things like growth stage startups, enterprise SaaS. Ultimately, decided to take the leap of faith and go start my own thing with Dan, who's my co-founder on this podcast.

We started an early-stage venture capital firm. And the thesis for us is evolve investing in the evolving Internet which we will talk a little bit more about. And then outside of that, we like to think we're in the platform building stage right now. So we're working on a couple projects.

Two of them are really the focus of our time today. One is I'm a senior researcher at the Harvard Business School where we research emerging tech across Web 3 and AI. And really think through thought leadership as a school evolving itself as well. And then the second project we're building what we call the Evolving Internet Club.

And, we call it a club because it's it's a cheeky way to say community, but really it includes a bunch of different things. The first thing is really this newsletter that we've launched recently really as a way for us to produce content put our voice out there, develop our thesis.

And also keep people informed and on, on emerging tech, which is moving really quick. So that's me in a nutshell.

[00:06:08] Pete Townsend: And Dan, given this is your first go around on money, never sleeps. How about you just give us a snapshot of your background and maybe give us a story of perhaps one of the formative experiences in the past that has led you towards venture. Sure.

[00:06:24] Dan Herrera: Yeah. So like Liang uh, got my feet wet first starting my career in management consulting.

Liang and I actually both met in in Kearney in Chicago. And that was an amazing experience because that was certainly my first view of just how the fortune 500 operate and. Have become the companies that they are today. So it was amazing to be a part of that and helping shape those companies in the issues that they had strategically and operationally.

After that I was ready to say goodbye to the corporate life rather quickly. And that's actually when I co-founded a urban mobility startup in Mexico city. And a lot of people ask me why Mexico City? That's pretty random. In our case, we were building. Effectively a hardware and software platform to provide the traditional taxi driver in Mexico City tools that Uber drivers had at the time.

So our whole platform had line of sight to around 150, 000 cabs, which translated to about 2, 000, 000 rides per day around the time that we were acquired in early 2018, two million rides a day was as much as lifted in the entire U. S. So the scale that was achieved in Mexico City is just immense.

And it was very much that similar situation with the traditional taxi driver in across Latin America. And what that did, among other things, was certainly spark my interest in Latin America, being Latin myself and also sparked my love of venture, because exactly after we got acquired, I said, okay.

This was an amazing operator experience. Let me go ahead and try venture and see what it is like on the other side of the table. So I jumped in I ran the largest and most active syndicate, pure place venture syndicate in Florida called Miami angels during my time there we had deployed around 20 million in two years and Basically, the earliest startups that came out of Miami and more broadly the U.

1. Much before the Miami that we know of today.

[00:08:28] Pete Townsend: Yeah, I was going to say, did you catch any of that flow of the exodus from San Francisco to Miami? No,

[00:08:35] Dan Herrera: I mean, This was even before that. Yeah. Really the catalyst for Miami, what it is today is, it was the pandemic. And of course, the infamous tweet heard around the world with Mayor Suarez around how he could help.

And that really just that, that just snowballed Miami into into what it is today. But, we were there really building the foundation for what was to come for the city. And after that syndicate, I then pursued my MBA economy business school where I recently just graduated and then now, as Liang said, so beautifully, we are jumping in and building our platform with the evolving Internet.

Club and beyond that our syndicate, our newsletter and a few other special projects coming down the pipe.

[00:09:17] Pete Townsend: Awesome. No, I get that inspiration. It's glad to hear that, and it's those formative experiences that are just critical and they can be such an anchor for your gut instincts with everything that you're doing when you guys were working together back at Kearney.

It looked like that was 2014, 2015. And was there something that stands out to you guys that, was an inspiration for you guys to find each other again and to partner on 1126 and the evolving internet club?

[00:09:45] Liang Wu: Yeah, maybe I'll kick this off because there's too many angles to this story all in a good way, of course.

But let's backtrack a little bit. We actually didn't only work together. We live together. So we were roommates, and so the way it worked was Dan and I come from pretty humble backgrounds, we both went to state schools, so not like Ivy Leagues although eventually we made it there, but at the time when we were interviewing for consulting Carney was my second job, so I was doing a job switch, but it was Dan's first job from undergrad, and as for anyone who knows, who's gone through the management consulting interview process, it is like the, one of the hardest interview processes, Because you get into a room with someone who is probably like two decades more experienced than you.

They give you some problem and you have to think on the fly as a way to test your consulting skills. Because Dan and I came from non target schools as they call it in the U. S. We didn't really have a lot of resources. So we found each other on this like online consulting training site. We like to think it's Tinder for consultants without the romance.

So then we realized we, really hit it off. We started practicing. So we did a lot of like Zoom calls like this. We started just interviewing, prepping each other and helping that. And so we met up in Chicago during the final round. And I think one of us had joked that, Hey, we both get the offer here.

Like what's your living situation. Maybe you should consider living together. And so that's actually how we ended up becoming, really close friends and best friends because we lived in the same apartment consulting is a pretty hard job, especially for new analysts and associates. And so we shared in the misery and in the glory.

And so that was really the personal story. Working together, I think for us, it was what Dan alluded to, just like drinking from the fire holes. We were young, 20 something year olds in boardrooms and rooms with like VPs and up, like my, one of my first project, my client contact was a VP who was probably 15 years older than me.

And so when you put yourself in that situation. It's a very much perform or get out kind of thing. And so I think it helped to have like our friendship because, we would teach each other basic things like Excel tricks and how to write a better headline. But I think the experiences going through together actually really shaped a lot of what we thought, what we are doing now and what we're thinking about now.

So that's my side of the story. I'm sure Dan has a slightly different,

[00:11:53] Pete Townsend: you guys must've talked about imposter syndrome quite a bit.

[00:11:56] Liang Wu: Oh, yeah. Oh, absolutely.

[00:11:58] Dan Herrera: Yeah. That was our Friday chats. Yeah. Yeah,

[00:12:01] Liang Wu: exactly. Yeah. Yeah. Yeah. Now there are a lot healthier Friday chats, but yes I think it's definitely a key theme and we see this a lot actually in founders.

To it seems like always the best founders they suffer from some level of imposter syndrome and I think it's just the way systems of design, right? And if you do anything hard, you're always coming from a position of you haven't made it yet. And I think that there's a psychological game you have to break through.

And I think Dan and I, Go through that regularly. Now, it's just a different game, but similar flavor.

[00:12:29] Pete Townsend: Oh, always. It's always there. And it's that it's self doubt, right? And self doubt can lead to learning. If imposter syndrome is never there, then you're not learning anymore. So it's a friend.

Keep by your side, right? Yeah. It's like you guys stayed by your side. How did you guys stay in touch? That was back 2014, 2015. What happened after that?

[00:12:49] Dan Herrera: We never really left each other because the day that we moved out of our apartment I also helped Liang move to Harvard business school.

So we, we drove cross country from Chicago to New York overnight. And at that point we have seen each other's skeletons and in our closets. And so we were bound by the hip ever since we from the time that we signed the lease till today.

[00:13:09] Liang Wu: And there were a lot of natural interest areas to I mean, Dan worked at a startup, so while I was at HBS, I had a short stint in venture capital as well, helping a firm called pair VC build out their on campus presence and their sort of sourcing engine at Harvard and MIT.

So there was just natural ways to share tips. As like progress, we always wanted to do something together. And finally, for better for worse, the pandemic kind of aligned a lot of things. And then after he graduated, I was moving back to New York and we had a very like a YOLO moment where you only live once.

And so we, I think we decided to just go for it.

[00:13:43] Pete Townsend: That's great. That's how these things work. Listen, guys, with, you know, kind of having that insight into the background and how this all came together, let's move forward to today. And that Liang, when you and I first met, thanks again to Kim Smith at Techstars who brought us together a couple of years ago, it was all in the context of the Web3 program that I run for Techstars.

And again, thank you for mentoring with us and also for helping us with the investment selection back earlier this year, because it's critically important to get insights from experts like you. And, I also, everything that I soaked up in your life and color blog on web three, that's really helped me to crystallize my thinking in a number of different areas around web three and just broader themes as well.

And, but your investment thesis, which we're seeing come to life in this new newsletter that you guys are writing together, as we talked about the evolving internet insights, it's bigger than web three. And I'm feeling that now as well. And that, the internet overall, it's evolving and it's moving pretty quickly just so that we can get a nice little picture of this.

Can you define what you mean by the evolving internet?

[00:14:50] Liang Wu: Yeah, we think of it across a couple areas. And I love the one line, one statement you said around it's bigger than that, because I think the world today is this crazy thing where all industries are smashing together. And you really have to find signal in a lot of noise.

Kind of thing. So when we think about evolving Internet, I'll speak about the couple areas and certainly some of the areas that Dan mentioned as well. we think of it across really three pillars. I think there's emerging tech. And so when you think about tech today, you can't get away from AI because AI is not a single industry thing.

It's a fundamental disruption. And so we think of it as AI and Web three. Web three is also a fundamental disruption. I think those two are more related. Then meets the eye, then I think there's just the evolving, call it consumer user or person, right? You think about people, you have kids, how they're growing up today and how I grew up, Dan grew up, you grew up very different, right?

We always joke about that. When I have to go change the volume on the TV, I might find a remote and, babies these days are going to grow up and be like, what the heck's a remote? And so I think that behavior, this is the next generation we're purchasing power and, will one day become the biggest part of the employee base and all of this kind of stuff.

So I think understanding the evolving user is very important. And then I, we think about evolving economies as well, which, I love Dan to talk about, but he mentioned Latam, which is like a really key understanding. So we think the internet as a whole, because everyone participates is evolving across all these sectors.

And so if you go too narrow. In your thesis, what happens is that you might have a great investment thesis, but it gets disrupted by something like AI because you didn't see it that way. And so we think we need to see macro before we go micro, but I love to pass it off to Dan to talk a little bit about just like the evolving economies and emerging economies as well.

Yeah.

[00:16:29] Dan Herrera: And before I do I will say what threads the needle across those 3 pillars that, that Liang talked about, is the internet as this great equalizer, consumers, the internet itself and geographies are all unified by this idea of the evolving internet.

If, and as Liang said, if I jump in here to evolving economies and evolving geographies with my time as an operator and with my networks to this day that exists largely in LATAM, Latin America. They're seeing a leapfrog a leapfrogging effect. And a lot of the technologies that they're adapting, if I think of one of the largest market, if not the largest market and most developed entrepreneurial ecosystem in Latin America it's certainly Brazil and you see what's coming out of there and. In a lot of ways, they are light years ahead of where the U. S. is. I think Pete 1 thing that resonates with you is certainly be the finance space.

And we look at the neo bank phenomenon that's happening in Brazil, right with new bank and how that was something that. Could never have been imagined at the scale that it's achieved today. Yet, it's how people interact with the financial system in Brazil and I would imagine in other countries within Latin America and, there is no semblance of a neo bank in the U S and frankly, in other developed economies, I think there's just a propensity to try.

 To adopt more quickly and to use these, rather pioneering concepts and platforms to go about their day to day in a much more seamless frictionless way because they've had it so hard in so many other ways that they're trying to get up the curve a lot quicker.

[00:18:06] Pete Townsend: I knew this was going to get me thinking guys. Those three pillars make a lot of sense together in that the emerging tech. Consumers and economies, right? And that the question I was going to ask you, Dan, and I think you just answered that for me with a new bank example, is that I can see how tech and consumers you've got the interplay there, right?

Obviously, you have the interplay between consumers and economies. But then we've got tech into economies. And what I was going to ask was the interplay there. I think you've just answered it in that. If you take Brazil for an example, when you've got a player like new bank in Brazil, where they've just become so.

Omnipresent that the things that they can do technologically and with a large customer base that has it's become viral it's way past the virality stage with new bank and in Brazil and even beyond that, that starts to change consumer behavior. And it starts to change economic behavior in terms of what is even possible for things such as savings rates for thinking about taxation.

Is that all going to income tax? Is that going to transaction tax on credit cards? Is that going to you name it? You can go on and on there and that can change the economic formula of things with technology that enables. Just different ways for people to live their lives through money and doing so at such a large scale with a new bank in Brazil because you know so many people have new bank accounts that it just becomes part of something that is a Lever to an economy and that being through technology my on the right track 100%

[00:19:50] Dan Herrera: and I and it's for your listeners to underscore the scale of this, Brazil plus or minus a couple million is the same size population as what we have in the U S and that's just Brazil.

That's just one country within larger Latin America. What's happening in Brazil is what's happening in Mexico, in Chile, in Argentina throughout the continent. And so it's why I'm personally very bullish. And I know Liang is as well, but having been on the ground and seen this. And seeing the rate at which populations within these countries are Willing and exciting to adopt these different platforms because it just genuinely makes their life better.

There's such high internet penetration rates in these countries. There is just a sense of opportunity that, that is still many generations of runway left in that continent for sure. And in other emerging geographies, not just LATAM,

[00:20:48] Liang Wu: yeah, the one thing I would add and Dan characterized it really well, is sometimes when you talk about emerging economies, people think it's one tech sector, but there's this other, again, it's just like every single tech sector.

So, A couple issues ago we saw a great report, and we, sort of dug into this a little bit, but the appetite for AI for the average user Latin America compared to the rest of the world, so Latin America, the survey did 62% of users. Wanted to adopt AI in Latin America, the rest of the world was 49%.

So to just give you a sense it's one stat, but I think it's a telling stat. And I think as Dan was talking about Brazil and these kind of economies. What's interesting is the internet part, there's the evolving part, but the internet part is actually really key.

And I think a lot of business models are just updating themselves to understand that. I think the internet is networking the entire world. So what that means from an economy standpoint, that's really interesting. is, we looked at what chat GPT 4 came out in March, right? Schools in Hong Kong are thinking about implementing it in their curriculum in September.

What other place in the world education system moves this quick? Now granted to the US credit, now the US has also waking up to it in certain districts, but it's very polarizing, right? And so the point is that in the traditional sense, when you had one economy sort of rule them all, you might not want to create AI and sell to education.

Institution because they would never adopt now. You're like customer based potentially is all the economies in the world, all the education institutions and each of the economies themselves are competing with each other, right? We might be, we being the US might be very anti AI or whatever.

Not that we are, but hypothetically, if that is Brazil is going to be like, great guys come build here, come sell here. We're more than happy to embrace it. Our customers are ready to do it. And so for us, as people who are. Like thinking about investing, right? That's something we have to understand and in a way disrupt how we think traditional structures are set up in investing and how we have to think about like capturing that opportunity.

So Brazil is like a really great example. And Dan's obviously the expert and has boots on the ground there. So it's been an interesting, like a case study for us, but I think it's just a tip of the iceberg.

[00:22:51] Pete Townsend: Definitely. And I think there's something as well to be saying that, people on the ground, wherever they live, having access at the fingertips to how the other half are living or the rest of the world are living and what they're doing, what they have access to.

And so their expectations start to go up . When. It comes down to, obviously, things at your fingertips, right? This newsletter that you guys are doing, that, how does this fit into the broader story on the evolving internet?

[00:23:18] Liang Wu: Writing and this is the part where we all talk about flywheels, because I know we can't do an episode with three of us and not talk about flywheels. So there is definitely a really beautiful flywheel here. One is just platform building for us.

I think fundamentally you believe that the thesis is how the internet is changing all the three pillars we're talking about. To us, the name of the game is attention and distribution. Whether it's actually us having a platform to help founders or putting our voice out there. So I think that's number one, right?

Distribution is going to be a key part of it. And we think it's a great way for us to build in public, which is a theme and a concept we're really trying to push. You see this a lot in Web3, obviously, or in any open source industry. The second big one that I think is really important is it forces us to think and really reason before we put something out there because the game is very competitive.

So if Dan and I, we see ourselves as much as writers as we are curators, if Dan and I find an article, but no one cares about it, like that is one piece of real estate on the newsletter that is wasted, right? And so for us, it really pushes us to really think what is actually interesting?

What is meaningful? What is insightful? And for us as a way to push that as well. And I think the third one that isn't really activated yet, but it is certainly on the roadmap, is how do you turn all of this into this community, right? People like what we have to say, presumably a percentage of those people want to connect with us.

Presumably a percentage of those people will be founders, right? So I think that kind of flywheel is what we're hoping to, but at heart of it. It's for us not to just lean on, historically where we went to school and the education we have, but constantly update ourselves and really evolve ourselves in a way to from writing this thing.

So that's been really big part of the experience,

[00:24:55] Dan Herrera: And I think the scale effect of a newsletter just allows us to reach so many more people than we would otherwise be able to do one off it's funny because yes, yesterday, funny enough, I was talking to a fellow investor.

And he was like your approach, it's so interesting, you're you're writing this newsletter as a way to, to get to founders, but in my case, I'm just reaching out to them one, after the other, I'm like, yeah This newsletter the other projects that we're involved with are all, as you said Pete and Liang creating this flywheel, right?

Our newsletter is a great, for example, excuse to reach out to founders and say, Hey, how can we help you? We have a job section in our newsletter, that's. If you have a role that you're recruiting for, give us your job description. We can put it there. We'll get a ton of eyes on this newsletter every week when we publish it for friends of ours.

For example, we've had a handful of friends that are looking for jobs actively right now, which in the U S with the unemployment rates as low as they are is it's not an easy feat. And if it, if simply creating a description putting in our newsletter gets it to, All the eyeballs that it does that's pretty powerful.

And a real show of good faith for our friends, whether they're founders or fellow investors or fellow job searchers. And so , that's just that section when you and then when you consider. The value that people receive from the information that we put out there and the content that we put out there, it's hopefully even more incrementally valuable to those that read.

And so flywheel is the best way you can describe what we're building and where the newsletter fits into this larger goal and journey that we have for it.

[00:26:38] Pete Townsend: I'm with you. And there's there's a few pieces of this

 to pull on. But, I imagine you guys writing together and that there's a process there of 1 person gets started and sends draft over and the other person fills it out with some of their ideas.

And that, this working on this together is going to have an impact between what you guys come up with. And do you think, how do you think this is going to strengthen your conviction on the kinds of founders and deals that you're looking to invest in?

[00:27:07] Liang Wu: I think one of the underestimated things for any good investor, regardless of your VC late stage you name it is pattern recognition. And I think pattern recognition. It gets built over time by seeing a lot of things, right? And so the top of the funnel has to be very wide in the sense that in this case for us, like We have to know a lot of things, and it's very, again, counter to if you think back to like college, for example, people major in one thing, right?

And you're specializing, like for us, we have to know a lot of things and understand how to piece together different pieces of information. And so one angle, one way to do that, right? To get smart is passive consumption. We could read a lot of news, right? For a lack of better term. The other way to do it and say we read a lot of news, but the next step of creating is actually a way higher bar.

It's a lot easier for me to go to the gym and listen to a one hour podcast. It's another thing to listen to a one hour podcast, understand how it might impact our investing activities and our network and our business development and our community and our marketing. And then it's a yet another thing to package that with our analysis and thoughts.

And so to your point, like the compounding really comes from us forcing ourselves, now we're doing two issues a week. Forcing ourselves to put it out there, knowing that it's not going to be perfect, but at some point you put enough out there, it compounds and, people reach out and say, wow, this was really awesome.

And so we've already seen this happen. We wrote an issue about Barbie and their use of AI in the movie and all of that, , but people have reached out and it was like, wow, this is interesting. I might borrow this and use it somewhere else. But we only got there because we went from passive consumption to actually like active creation.

And I think that. Is both a harder and an easier thing than a lot of people think, and so that's really the routine we put ourselves on and hoping that the compounding and the growth take cares of itself over long enough time

[00:28:56] Dan Herrera: and further threading the needle between this idea of conviction and newsletter writing.

When I was in school we heard from Ian Sigalo, who's the co founder and managing director at Greycroft a full lifecycle fund based out of New York, and Ian said, That the founders that he invests in are those that he himself would want to work for. And so as we write, as we research every issue of our newsletter, we're able to understand the stories of these startups and really understand what that means beyond the fact that we're already talking to founders.

And again, getting a sense for getting a sense of who we would want to invest in, how we would build conviction for investing in these deals. But the combination of speaking to founders and researching them. Really, it's just we're further reinforcing this pattern recognition idea of would these be founders that we wanna work for?

And further honing this investor sense, if I could call it that. So it's a great tool that, that has actually been a benefit that we fully, we couldn't fully value before we embarked on this journey. But having written the issues that we have and being six or seven weeks in.

It's been a pretty amazing tool and a further fire flywheel and in, in that regard.

[00:30:17] Pete Townsend: Yeah, I think I have some ideas around this now and, Liang knows this, but I mean doing this podcast with my now former Sniff Sniff Podcast co host Eoin Fitzgerald. He's moved on to a role in the Central Bank of Ireland.

That means he's got the He can't speak about things publicly anymore,

[00:30:36] Liang Wu: but the flywheel worked, right? The flywheel worked. He's gotten there. The flywheel worked. He did.

[00:30:41] Pete Townsend: He did. And doing that, doing this with him. And there, it was a combination of writing, but also the podcast and teasing things out. And looking for patterns in the stories that we covered that, it really helped me to form my conviction around this.

And now it's central to so many different things that I do. And when I read that post that you mentioned Liang about how Barbie used AI to go viral. I couldn't help but think about this and as we've been talking about this UGC or user generated content flywheel, whether it's viral or not for generating deal flow and VC, we've talked a little bit about this and I think my reference point for some of this is Nick Milanovich from the FinTech Fund and this week in FinTech and he and I don't know, I don't think he ever talked about it in terms of flywheel, but there's some components there.

And it's just like picking one thing that you know, you do really well. And then having these different levers to allow that thing to really take shape and for you to deliver that. I think I have an idea what those components of your flywheel are, but please share what you think they may be.

[00:31:46] Liang Wu: I, it's it's interesting because I think you, the term you mentioned user generated content, which for those who don't know, that was really the crux of the Barbie story. Barbie created an AI selfie tool that you upload your photo. It remixed it onto a Barbie poster, and then you could share it on social media.

Sounds like a really simple thing, except for when you live in an attention economy, and there's abundance of everything and that's only increasing with AI. We think, again, attention is the name of the game. So to your question around user generated content and how that could help us, I think it goes back to really simple, pure game we're playing, right?

Research things that people are too busy to research that they shouldn't know. Summarize them and write content that makes them feel informed. . And then when people are excited, they think of a couple things, right?

Either you're a founder and you're like, yep, these guys actually know what the heck they're talking about and they're building in public and they're hustling. Those are all things I should respect as a founder, right? So they might come to us versus someone else. You might have a partner or a person who we want to, collaborate with.

And they say, great, these guys know what they're talking about. They're pretty eloquent. They've spoken on podcasts like Pete's and all of that. And we might want them to speak at a conference, which then builds more attention. And so I think to me, the user generated content game is really all centered.

around attention. And attention is actually one of the hardest things to get, right? Like we mentioned, it's very competitive game because everybody else is trying the same thing. So for us, quality actually matters a lot. When people see us for the quality, what happens and they didn't share it in their networks.

And to your point because everything is a network on the Internet, it propagates by itself. So that's the hope and the flywheel. But again, it all starts back with really basic things, which is Can we produce good content and can we get it out there? I think that's really the two things Yeah, we try to do we can work out.

Yeah,

[00:33:35] Pete Townsend: and then hopefully people do share it right in that, you know The Barbie filter right that is something we've got that strong action point where you see it You like it You're not just sharing on that post You are actually going into the filter. You're using that yourself and you're sharing your own.

So it's a bit of hey curiosity Let's go see how this works, but also a bit of vanity And that I want my face to be on this filter that then gets shared and helps to go, viral to the next thing. And when you're writing, it's, hey, somebody, you want someone to take action off that you want somebody to share that on, but then you're dependent on the next person that they share it with to also have that same reaction and say, wow, no, this was really meaningful to me.

I actually want to share this. I don't want to put my own thoughts on top of that. That has a little bit of a. A lot longer of a time frame there than an AI filter for Barbie, right?

[00:34:32] Dan Herrera: 100%. And it's actually exactly what happened with a founder friend of ours. He said, this was such a great post. I want to, take some stuff out of it to certainly showcase the writing, but then add, add my flavor on top.

And that was actually one of the Highest impression reposts that we got from our Barbie AI announcements. So that was took to this idea of UGC flywheel going, living outside of Barbie. And specifically pertaining to the evolving Internet Insights newsletter that we have, it's happening.

And so that's been tremendously gratifying and really cool to see that it's already happening. All

[00:35:10] Pete Townsend: where I think this is going is that I think the community component, the club component is critical, right? Because just if you think of the pieces of the flywheel and again, for those that may not be that familiar with it, the Disney one is very simple.

People watch a movie. They get really inspired by the movie. They know there's a theme park. They want to go to the theme park. They go to the theme park. They see the merch. They want to buy the merch. They bring the merch back home and then they want to watch the movie again and they go back to the theme park.

It goes around and around. I think for you guys, it's that, you start, you do the writing and you do it so well that you get this sharing onward of this. And you invite people in to join this community, to join this club, and you start to get this cross reference of activity between different types of folks who join this community and that I think one of the critical components there, if you're doing this as an investment platform, is that as part of that community, you have other investors, right?

Because that's where you get to get the sharing of deal flow. So you get that community built, and that allows you to start building up your Investment base, right? And that whether you have investors that would invest in you and what you're doing through a syndicate or it's investors that are referring deals to you or it's startup founders who then are become people that you want to invest in and you get that component of investments going and that component of investments and all the lessons learned feeds your writing, right?

And that writing feeds into a bigger community and that community grows and you go around and around mine on the right track here.

[00:36:49] Liang Wu: Yeah, nailed it. I mean, It's uh, it's, it's, that's why you're the flywheel expert. Yeah, I think that's completely right. And the beautiful thing about a community is Dan and I have built communities like in real life.

We've done it as part of jobs just for fun. We like to think our network is a community. The key is really about bringing all different people together and for us to be be at that point to route them. So it's not even just like deal flow, we have friends who are call it in their first or second job, but really brilliant in something.

They're not ready to be a founder, nor do they want to be. They don't have the capital to invest, but they know a lot about a lot. And so the question is, how do we include them into the network, into the community? So when we have a really complicated deal in AI or some technical web 3 thing, we have the 3 to 5 people we could ask.

And get better stuff. So it's not even just that, right? It's like all of these mini flywheels as well, too. And I think for us it comes down to a very simple thing. It's when Dan and I were really like sketching this out and thinking through this early in the summer, I think we landed on this is just something we enjoy doing.

We might as well try to put it into a platform and make a business out of it. And so that was the part that was like really aligned to us as well too, but at some level it needs to be that you have to be the person or the set of people who enjoy brokering these relationships and bringing people together in this way on the internet, which I don't think everyone is interested, but lucky for us, we are yet.

[00:38:11] Pete Townsend: Yep, I'm with you. Listen, we're co creating a bit here. And in the spirit of co creation, I wanted to tease something out with you guys to see if we could actually have some of this.

Podcast riff impact here on, on some of my thinking. And this comes back to a chat I had with Sam Williams from Arweave. Who was at that investor dinner? He was only there for about 15 minutes, but he stopped by. Did you guys get to say hello to him when he was there?

[00:38:35] Liang Wu: I did not. Maybe Dan

[00:38:36] Pete Townsend: did. No.

Yeah, Sam Williams from Arweave. Just brilliant guy. Shout out to Sam. I did an episode with him last year. And this was... I had a chat with him before that dinner on expanding my view on Web3 through a chat I had with someone else. And he said, Pete, you gotta start thinking about AR and VR. And I said that to Sam.

He's like, Pete, just stop. . Just stop. Don't go there. He said, Web3 is a protocolization of web services. He said... Think about anything that can be protocolized and open sourced it will be back in the nineties. It was SMTP for email. Now, in the last 12 to 14 years, it's been things like payment systems, i.

1. with crypto stable coins and file storage. Are we being one of them and amongst a number of other different type of web services again, that can be protocolized and then open sourced. And that's the whole idea. But think about things like e commerce on Amazon. Could that become a protocol? Could Shopify?

Become a protocol and that it's just these open source utilities for people to use and that, you end up with these fluid combinations of composable protocols, which is a bit of a mouthful, but composable being the nature of Web three that you can plug things all in together like Lego blocks.

And it's not building up up. It's building up and out and that, we could end up with , all these different kinds of web services all plugged into each other. Yeah. To take the place of centralized tech stacks. First, is this where we're headed? And I think AI may have something to do with this.

And once you plug the two together, what do you guys think about this thought of supercharging everything together here?

[00:40:15] Liang Wu: Yeah, it's it's an interesting thought. If you asked me a year and a half ago, again before the like generative AI boom or before the generative AI like mainstreaming, I would have tend to agree.

I think the challenge and where I think it's really important to understand is we've established that AI will impact every single industry. And so the important thing to understand about that is what exactly does AI do, right? And not like the nuts and bolts, but like from a market power perspective.

AI has this actually crazy risk of making the bigger players even bigger. And that a lot, actually, in a lot of the traditional people going on the internet, right? A lot of the names are still the same. Granted, there were new players who entered the markets on and so forth.

But the point I, we talk a lot about this and we have an article we wrote about that came out today about McKinsey and PwC, which are two global consulting firms. Who are building their internal AI research tools. The kicker there is the data that it's trained on, the real juicy data that it's trained on, it's all IP and proprietary.

 AI has this potential where if you have a bunch of data, which a lot of the Web 2 giants already have, you could actually create your own version of AI and use that as a tool to even pull further ahead, right? So there is that whole thing going on.

The tendency to centralize. So I think Web 3 whether it will or can is two different things. But I think Web 3 becomes more critical because Web 3 is fundamentally pushing this open source movement. And it's not just open source, like the code is open, right? AI code, a lot of it is open.

But the data in Web 3 is open. And so I think that creates this kind of dichotomy, if you will, where I think one set of players, aka incumbents, Want to continue centralizing and using AI to get bigger, which is how their structure, but on the other side, you have this movement that's more bottoms up that says we all share the data.

We could build better things and for more people and all of that, and then you loop in everything we talked about the involving Internet. What are the founders in Brazil doing versus the founders in Asia versus the founders in Europe and U. S. Right? It's becomes this really like a mismatch of different things.

I don't, per se, have a view whether everything will be protocolized or whether it should. I think my view is that AI is this thing where it's changing like how people view scale and power and what it could enable. And I think there's a real risk that if today the world is run by X number of companies that risk gets even more acute moving forward if there isn't something done about it.

And so that's the framing we've gotten to.

[00:42:49] Dan Herrera: I think as you scale. Out to other geographies where there isn't a really well established base of the corporate incumbents that we have here in the US.

For example there is a propensity to use AI in particular as a way to build and scale efficiently the rest of the for success for a lot of. Yeah, entrepreneurs SMBs in emerging markets is we're already resource strapped. We're already just scraping by what can we use as a tool to get better.

From that standpoint in emerging markets, I do see as this again, use, I'll use the term again equalizer allowing, SMBs. Small scale entrepreneurs to build as if they had, larger teams than than what they actually have. From that standpoint it's very promising to see where, how AI is enabling this, middle of the pyramid, quote, unquote and allowing those to build in a much more efficient, scale efficient way.

One, thinking of. Now scratching the itch that that Liang created for me on this idea of corporates and power consolidation at those levels, there's still hope, I there's no relation to our weave, but there's another company called core weave. Which we've recently started researching and core weave is effectively an infrastructure playing an infrastructure player for those companies looking to plug into, aI GPUs within data centers. Imagine for example, effectively AWS, but for AI computing power. And so this company recently was in the news because they just raised something on the order of 200 to 300 million to effectively take on the AWS is the Azure's and the Google clouds of the world.

In this space of AI computing tower. And so this is one where, any one of those three companies could literally squash a core weave, they were just on it and to market in a much earlier way in a rather fortuitous way. And, and so they are taking this swell of interest in AI and really beginning to capitalize.

So while this company was further advanced than the SMBs and smaller entrepreneurs that I referenced, there still is the chance that there are others. That, that makes their way to these large scale companies. Like what Liang said a, an AWS or a McKinsey or PwC is able to do.

[00:45:26] Pete Townsend: I gotcha. And I, I'm thinking about this idea of, will the big players, right? If they have so much data themselves and they can train. These AI models and they can get things humming at an even faster rate and far more efficiently than they are right now, then even if there is an open source protocol that can replace some of these processes that they're running internally, would they even care?

[00:45:58] Liang Wu: . I think many people don't realize or internalize this, but most of the internet is actually built on open source code. But the value that has been captured has not gone to the creators of the open source code.

It's gone to normally the companies who have built like data structures and layers on top. And so the way we think about it is there's really these two things, right? There's the code. Which I think largely will be commoditized. Like a while back I think there was a leaked memo from Google that basically says we have no competitive advantage because open source is gonna kinda eat our lunch, so to speak.

And I think what that memo was really referring to is like, If you think of all these models out there we have a company that we're working with a good friend of ours as well. They're building an aggregation layer to help you select which model to use, which suggests there's a catalog of models to use, right?

So it's not just like chat, it's just not GPT 3 or GPT 4, whatever. There's all these other things. And there are a lot of models that are open source. Facebook, interestingly enough, or Meta. Has been doing a lot of open source work as well too. I think the central question on whether this like protocolization thing that Sam was talking about could work is whether open source models could actually capture value.

And so the way I see it is and we hang around a lot on the internet and in Web 3 is you have a lot of people putting out protocols and open source code that is supremely useful but the value capture has not been figured out so then there's no incentive for like real players to open source.

And the way I think about it is very simple, right? A large company Their incentive is to maximize profits, just the way they're structured. If the open source model allows them to maximize more profits, and ideally the open source model allows like more regular people and smaller scale players like Dan mentioned, to capture value, then it makes sense.

The question is, can open source do that? And I think this is where Web 3. 0 incentives and all of that is like a very new thing that we're trying to experiment with just as a technology industry, the problem is the early innings are always bad, right? We've had a lot of scams. If you say tokens at a party, people run away and think you guys are the crazy ones.

And we don't use that word too often, right? But could it work in the long term? You're now getting into something more philosophical, like the Internet was crazy when it first started. Could it work in the long term? We're in that long term work now, and it's working, right?

Not without its problem. So I always reason back to you. I think a lot of people could create a lot of value and on the internet, it's proven a lot of people want to create, whether it's content code, anything, the question is, can they capture their value such that we don't need these like big structures to dictate how value works, but it just accrues that.

And I think that's the grand experiment. So I think it relates more to the question around open source than it does, say, AI versus web three. I think they both will coexist in the future.

[00:48:43] Pete Townsend: Dan any, any burning thoughts on that?

[00:48:45] Dan Herrera: Other than the fact that I have a great ICO idea for you guys. No, just kidding.

[00:48:51] Pete Townsend: Well, I mean, To me, this brings it all back to what we were talking about before, which is that the opportunity of technology to drive economic behavior, right? And that, like you said, Liang, if a big company and a number of big companies. That have influence in economies are able to significantly transform what they're doing through technology, then that does impact economic behavior and consumer behavior.

So it's all kind of part of your three pillars here, and it's a nice place to round things out from.

[00:49:25] Liang Wu: completely agree. I think there's just going to be so much to unpack through all of this. And again, the emerging markets one is a. Perfect example because we haven't even started we're just scratching the surface there because now we're talking, thinking about the U.

1. to now thinking globally. It's a different stretch, but I like to think at the end of the day it comes out back to incentives, right? I think what we're seeing now in this technology boom is more people are willing to say, hey, maybe this new thing could work and let's try. And by the way, if we don't try, we risk getting left behind.

I think more industries are adapting at a quicker rate than we could have imagined. And I think, net, that's a good thing. The worst, I think, or the common thing people do with new technology is like, Oh, let's just pretend it didn't exist. If we just reasoned from AI didn't exist and Web3 didn't exist, the world would look like this.

And it's yes, that is true. But the fundamental assumption that AI doesn't exist and Web3 doesn't exist is completely false. So now we're seeing certain industries are faring better than others. Music industry is a good one, right? They're trying to figure it out. Obviously, you've got the whole thing going on in Hollywood.

A lot of good stuff in emerging markets. I think this makes it feel like it doesn't feel like there's a small group of people who are crazy chasing this stuff. There's actually a large group of people who might feel crazy to the other side, but they're all trying to experiment. And I think that's actually a healthy Competitive race that's happening and unfolding right before our

[00:50:43] Pete Townsend: eyes.

Yeah. Yeah. I know there's someone I think we all know who would like to think that none of this stuff does actually exist. But we'll leave it at that. On the note of finishing things off cleanly, Liang, you already answered our final question. In the last episode that you and I did, which was one thing that we wouldn't expect to know about you and it's your commitment to food as an act of service and kindness and I've taken a lot out of that.

I'm not doing much of that myself these days and with the crutches, but it, my, my wife is doing that as an act of service and kindness to me instead, which is brilliant. But Dan, what's one thing that people wouldn't expect to know about you?

[00:51:24] Dan Herrera: I would say to answer that question. It definitely comes back to my upbringing.

I am, both my parents were born in Cuba left shortly after Fidel Castro took over. And. Basically made new lives here in this country. So growing up what that meant for me and how that shaped my identity is certainly appreciating what the U S has done for me and the opportunity it's given, not just my parents but myself, because if I think of the counterfactual, it would be me in Cuba and, certainly not not nearly as accomplished as I am today.

On the other hand. I have this very fortunate position where I straddle my roots as well as this life in the U S. And so what I think people would not really expect about me is just how much of an advocate I am. For people like me, for people like Liang to, achieve whatever their future is.

If I look at what Liang and I find so amazing with the work that we do in venture it's helping founders that look like us achieve amazing outlier results. We've done a lot of research in what it means to be a, a, a. Underrepresented founder or an underserved founder.

And those people we consider to be women, minorities and immigrants. And it just so happens that those same people account for the most value created in this, and certainly the U S and when we look outside to emerging markets, Most definitely in those markets, LATAM is being built by Latin American investors.

Asia is being built by Asian founders and investors. And there is the sense of with all those that we come across and across our patch, Liang and I want to make sure that as investors, we are helping those founders in building their dreams. And it.

It's very central to this idea of the evolving internet to make sure that we're empowering these underserved and underrepresented founders. So that's something that I. Really consider myself an advocate of, and something that people wouldn't expect to know about me, I think. That's really

[00:53:31] Pete Townsend: cool.

And I saw this going all the way back in your LinkedIn profile, to your Congressional Hispanic Caucus Institute involvement, when you were a congressional intern back in the day. And that, again, always interested in the roots of these things to where it came from, but I think obviously your upbringing set you on this path, which is pretty cool.

 Incredible founders are everywhere and you don't need to grow up in a certain area to have that passion around solving a big problem for a lot of people. And that inspiration can come from anywhere. Love that story. Guys, given where we got to with this, what's going to be the best way for people to get in touch with you?

[00:54:11] Liang Wu: I think whenever I tell people this they never believe us. But definitely reach out to us on LinkedIn. We're quite active there. And when people DM us, we try to respond as much as we can and we make it a habit. So I think LinkedIn is definitely one.

I think if people want to reach us directly I am Liang at E26. co and Dan is Dan at E26. co if they want to email. But we spend more time on LinkedIn just because that's another top of the funnel platform for us. So whenever we tell people to reach out there, they think we're just joking but we're not.

[00:54:39] Pete Townsend: It's making a comeback. I'm hearing that more and more. Yeah. And there, there's tons of noise that comes through LinkedIn. If you look at every single one of them, we're putting ourselves out there as investors, deal flow comes to you in all different shapes and forms. LinkedIn messenger is one way for those to come in.

[00:54:59] Liang Wu: 900 million users is way bigger than Twitter slash X right and other networks and if you go to other social networks It's not as professional right meaning it's more personal like Facebook and So on LinkedIn's been very interesting.

Some of the folks we who are like co investors and friends , and he started a fund with a friend who's from India, but he built his entire deal flow sourcing engine on LinkedIn, targeting like in, from the U.

1. targeting the Indian country It's just amazing, right? What you can do. And so I think there is a little bit about going where other people aren't going yet. And so for us yeah, definitely hit us up there for sure.

[00:55:35] Dan Herrera: my mind has never been changed on LinkedIn when when a good friend, Mark Kingdon Received his invitation to be a seed investor in Twitter through a LinkedIn DM.

There's potential, as you said, Pete, and I would also shamelessly plug our evolving internet insights newsletter. Please engage with us, please read please share. I'm sure that you'll find the the content tremendously valuable and any sort of reactions that we could get to what we write makes it all worth it for Liang and I.

[00:56:04] Pete Townsend: And that's on Beehive, isn't it? Correct. It is. All right. All right. . Listen, guys, thank you so much for coming out to show Liang was great to have you back, Dan, first time having you on the show.

It's been awesome. Really appreciate teasing these things out with you guys and hearing the story about evolving internet insights and where you're going with the whole platform. So thank you. Thank you, Pete.

[00:56:26] Liang Wu: Appreciate it.

[00:56:31] Pete Townsend: That does it for this week, folks. Thanks to Liang Wu and Dan Herrera for opening up their minds, help us figure out why they do what they do. You can learn more about Liang, Dan and Eleven26 Capital in the show notes on our website, moneyneversleeps.ie. Also to go straight to the source, check out their excellent Evolving Internet Insights newsletter on evolvinginternetclub.beehiiv. com.

 If you like what you heard, please leave us a rating and a review on Apple Podcasts or Spotify as it helps others to find the show. Thanks to Conan Brophy from CreateSound for mixing and editing this episode. Conan is an excellent media man to get in touch with when you're thinking about launching your own podcast.

As for me, I'm an early-stage startup investor focused on where Fintech meets crypto and crypto meets web three. And I lead Techstars Web3 accelerator. There are plenty of links in the show notes on MoneyNeverSleeps.ie on how to get in touch. So don't hesitate to reach out.

Finally till next time, thanks for listening - see ya!.